DoD's $352M Raytheon Contract for Special Project Modernization: A Deep Dive into Value and Competition

Contract Overview

Contract Amount: $352,564,474 ($352.6M)

Contractor: Raytheon Company

Awarding Agency: Department of Defense

Start Date: 2015-11-10

End Date: 2026-08-31

Contract Duration: 3,947 days

Daily Burn Rate: $89.3K/day

Competition Type: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Number of Offers Received: 3

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: SPECIAL PROJECT MODERNIZATION

Place of Performance

Location: WOBURN, MIDDLESEX County, MASSACHUSETTS, 01801

State: Massachusetts Government Spending

Plain-Language Summary

Department of Defense obligated $352.6 million to RAYTHEON COMPANY for work described as: SPECIAL PROJECT MODERNIZATION Key points: 1. The contract's fixed-price incentive structure aims to balance cost control with performance incentives for Raytheon. 2. With a duration of nearly 11 years, the long-term nature of this project suggests significant strategic importance for the Air Force. 3. The 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' sector indicates a focus on advanced defense technology. 4. The contract was awarded under 'Full and Open Competition After Exclusion of Sources,' a nuanced approach requiring careful scrutiny. 5. While the specific 'special project' is not detailed, the substantial value points to a critical modernization effort. 6. The fixed-price incentive (FPI) contract type suggests that cost overruns are shared between the government and the contractor, with incentives for meeting targets. 7. The contract's value of over $352 million over its lifespan warrants a thorough assessment of its economic efficiency.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging without specific details on the 'special project.' However, the fixed-price incentive structure is designed to provide some cost control, but the long duration and potential for evolving requirements could introduce cost risks. Comparing it to similar large-scale defense modernization programs would be necessary for a more precise value assessment. The initial award value and subsequent modifications will be key indicators of cost performance over time.

Cost Per Unit: N/A

Competition Analysis

Competition Level: limited

The contract was awarded under 'Full and Open Competition After Exclusion of Sources.' This indicates that while the competition was intended to be broad, specific sources were excluded, possibly due to proprietary technology, security concerns, or prior development work. The number of bidders is not explicitly stated, but the 'exclusion of sources' suggests a potentially narrowed field compared to truly full and open competition. This could impact price discovery and potentially lead to higher costs if the excluded sources represented significant competitive threats.

Taxpayer Impact: The limited competition may mean taxpayers are not benefiting from the lowest possible price achievable through a wider bidding process. The exclusion of certain sources warrants scrutiny to ensure it was justified and did not unduly restrict competition.

Public Impact

The primary beneficiaries are the Department of the Air Force and potentially other branches of the Department of Defense requiring advanced navigation and detection systems. The services delivered likely involve the development, integration, and sustainment of sophisticated systems critical for national security operations. The geographic impact is likely concentrated around defense installations and operational theaters where these systems are deployed. Workforce implications include highly skilled engineers, technicians, and program managers within Raytheon and its subcontractors, as well as military personnel trained to operate and maintain the systems.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

The 'exclusion of sources' in the competition raises questions about whether the most competitive pricing was achieved.
The long contract duration (nearly 11 years) increases the risk of cost growth due to unforeseen technological changes or inflation.
The fixed-price incentive structure, while offering some control, still carries the risk of cost overruns if performance targets are not met efficiently.
Lack of detailed public information on the 'special project' makes independent value-for-money assessments difficult.

Positive Signals

The use of a fixed-price incentive contract type demonstrates an effort to align contractor incentives with government objectives.
The award to a major defense contractor like Raytheon suggests access to significant technological expertise and established supply chains.
The contract's focus on modernization indicates investment in advanced capabilities, potentially enhancing national security.
The long-term nature of the contract may provide stability and predictability for critical defense system development and sustainment.

Sector Analysis

This contract falls within the Defense Industrial Base sector, specifically focusing on advanced systems manufacturing. The market for such specialized defense electronics is characterized by high barriers to entry, significant R&D investment, and long product development cycles. Comparable spending benchmarks would involve other large-scale, multi-year defense modernization contracts for complex systems, often exceeding hundreds of millions or even billions of dollars.

Small Business Impact

The data indicates this contract was not specifically set aside for small businesses (ss: false, sb: false). While large prime contractors like Raytheon often engage small businesses as subcontractors, the primary award is to a large entity. The extent of small business participation will depend on Raytheon's subcontracting plan and the availability of specialized small businesses capable of supporting this complex project. Without specific subcontracting data, the direct impact on the small business ecosystem remains unclear.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management structures, likely involving the Air Force's program executive office and contracting command. Accountability measures are embedded in the contract's performance metrics and incentive clauses. Transparency is limited by the classified or sensitive nature of 'special projects,' but contract modifications, funding actions, and performance reports are typically managed through federal procurement systems. Inspector General oversight would apply to allegations of fraud, waste, or abuse.

Related Government Programs

Air Force Research and Development Programs
Department of Defense Advanced Technology Development
Navigation and Guidance System Modernization
Defense Intelligence Systems Acquisition
Aeronautical Systems Development Contracts

Risk Flags

Limited competition due to source exclusion
Long contract duration increases risk of cost escalation and obsolescence
Lack of public detail on project scope hinders value assessment
Potential for cost overruns inherent in FPI contracts

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $352.6 million to RAYTHEON COMPANY. SPECIAL PROJECT MODERNIZATION

Who is the contractor on this award?

The obligated recipient is RAYTHEON COMPANY.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Air Force).

What is the total obligated amount?

The obligated amount is $352.6 million.

What is the period of performance?

Start: 2015-11-10. End: 2026-08-31.

What is the specific nature of the 'SPECIAL PROJECT MODERNIZATION' and why was it classified or not publicly detailed?

The specific nature of the 'SPECIAL PROJECT MODERNIZATION' is not publicly detailed, likely due to national security sensitivities, proprietary technological advancements, or ongoing research and development efforts. Government contracts often involve projects that, if disclosed, could reveal strategic capabilities, operational plans, or technological advantages to adversaries. The classification ensures that sensitive information remains protected. While this lack of transparency is common for certain defense projects, it significantly hinders independent analysis of the project's necessity, scope, and ultimate value for money. Further details might be available through classified channels or declassified reports years after project completion.

How does the 'Full and Open Competition After Exclusion of Sources' process typically impact pricing and innovation compared to standard full and open competition?

The 'Full and Open Competition After Exclusion of Sources' (FCAESO) process is a hybrid approach. Standard full and open competition aims to maximize the number of potential bidders to drive down prices and foster innovation through diverse solutions. FCAESO, however, begins with the intent of broad competition but then excludes specific sources. This exclusion might be based on factors like unique capabilities, existing intellectual property, or national security requirements that limit the pool of eligible contractors. While it can ensure that specialized expertise is considered, it inherently reduces the competitive landscape. This reduction can potentially lead to less aggressive pricing than if all capable sources were allowed to bid, and it may limit the breadth of innovative approaches considered. The justification for exclusion is critical to understanding its impact on taxpayer value.

What are the typical risks associated with a Fixed Price Incentive (FPI) contract of this duration (nearly 11 years)?

Fixed Price Incentive (FPI) contracts aim to share cost risks and rewards between the government and contractor. For a contract spanning nearly 11 years, several risks are amplified. Firstly, the potential for significant cost escalation due to inflation over such a long period is substantial, even with incentive clauses. Secondly, technological obsolescence is a major concern; systems developed early in the contract may be outdated by its end, requiring costly modifications or replacements. Thirdly, the complexity of managing performance targets and cost ceilings over an extended timeframe increases the likelihood of disputes and contract modifications. Finally, the contractor's financial stability and commitment over such a long duration can be a risk factor, especially if market conditions or company priorities shift.

How does the contract's value of over $352 million compare to other major defense modernization programs in the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrume

A contract value of over $352 million for a specialized defense system is substantial, placing it within the upper tier of major modernization programs. Within the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' sector, programs of this magnitude are not uncommon, especially for platforms or systems requiring cutting-edge technology and long-term sustainment. For context, major aircraft development programs, advanced radar systems, or satellite navigation constellation upgrades can easily run into billions of dollars. This $352 million contract likely represents a significant component of a larger modernization effort or a critical, high-value standalone system. Benchmarking requires detailed comparison of scope, technological complexity, and program duration against similar classified or unclassified defense procurements.

What is Raytheon Company's track record with similar large-scale, long-duration defense contracts, particularly those involving incentive structures?

Raytheon Company (now RTX) has an extensive track record of managing large-scale, long-duration defense contracts across various domains, including radar, missile systems, and aerospace technologies. They are a prime contractor on numerous programs involving complex integration, advanced manufacturing, and sustainment services for the U.S. military and international allies. Their experience with Fixed Price Incentive (FPI) and other incentive-based contract types is significant, as these structures are common in defense procurement to manage cost and performance risks. While specific performance metrics for past contracts are often not publicly detailed, Raytheon's continued success in winning and executing major defense contracts suggests a generally capable performance history. However, like any large defense contractor, they have likely faced challenges, contract disputes, or cost overruns on specific projects over their history.

Given the 'SPECIAL PROJECT MODERNIZATION' designation, what are the potential implications for future technological advancements and military capabilities?

The designation 'SPECIAL PROJECT MODERNIZATION' implies that this contract is intended to significantly upgrade or introduce new technologies that are critical for maintaining a military advantage. Such projects often focus on areas like enhanced sensor capabilities (improved detection ranges, reduced false alarms), advanced navigation systems (greater precision, resistance to jamming), or novel guidance mechanisms. Successful modernization in these areas can lead to improved operational effectiveness, enhanced situational awareness for warfighters, and the development of next-generation military platforms. The investment suggests a strategic focus on areas deemed vital for future defense needs, potentially shaping the technological landscape of military operations for years to come and influencing the development trajectory of related defense industries.

Industry Classification

NAICS: Manufacturing › Navigational, Measuring, Electromedical, and Control Instruments Manufacturing › Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing

Product/Service Code: COMM/DETECT/COHERENT RADIATION

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 3

Pricing Type: FIXED PRICE INCENTIVE (L)

Evaluated Preference: NONE

Contractor Details

Parent Company: Rockwell Collins Australia PTY Limited

Address: 225 PRESIDENTIAL WAY, WOBURN, MA, 01801

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Manufacturer of Goods, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $365,593,643

Exercised Options: $361,677,895

Current Obligation: $352,564,474

Actual Outlays: $10,374,231

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline